As cryptocurrency grows in popularity, more people are turning to what is known as mining as a way to bring in some extra income. However, not all mining activities are equal; small differences in the facts and circumstances can have substantial impact on the tax consequences.
Much of the nuance hinges on whether the activity is a trade or business under Section 162, which, in many circumstances, may not be a simple thing to determine.
If you choose to treat your mining as a business, earned bitcoin is reported on a Form 1040 Schedule C. The benefit of this is the ability to deduct mining expenses as deductions for your crypto business. Along with direct costs to mine the digital currency, treating the work as a business opens the door to additional tax reduction strategies.
To learn how to maximize your crypto mining activity, keep reading.